US economy sees its biggest jobs increase ever in May. The Labor Department reported that the unemployment rate declined to 13.3%.
The data from the government agency showed that employment rate in the US increased by 2.5 million in May. The increase is deemed far better than what economists predicted. For some analysts, it may mean that an economic turnaround could be nearer.
According to economists consulted by Dow Jones, they expected payrolls to fall by 8.33 million and the unemployment rate to increase to 19.5% from April’s 14.7%.
If Wall Street expectations turned out accurate, it would have been the worst decline since the Great Depression.
However, May’s figures showed that the US may recover fast after its quickest drop in history.
“It seems the damage from the nationwide lockdown was not as severe or as lasting as we feared a month ago,” said Scott Clemons, chief investment strategist at Brown Brothers Harriman.
Stock market
Meanwhile, the stock market surged higher after the report was released. The Dow Jones Industrial Average performed better with its opening at around 700 points. Government bond yields raced better as well, with the benchmark 10-year Treasury most recently at 0.91%.
President Donald Trump celebrated the results of the report in his tweets.
US economy considers the jobs increase in May the biggest ever in US history since at least 1939. The only previous month to record more than a million jobs was September 1983, at 1.1 million.
“Barring a second surge of Covid-19, the overall U.S. economy may have turned a corner, as evidenced by the surprise job gains today, even though it still remains to be seen exactly what the new normal will look like,” said Tony Bedikian, head of global markets at Citizens Bank.
The rise in employment reflected the 2.7 million decline in workers who reported being on temporary layoff. Economists was hesitant about whether that would be the situation or if more job losses would unfold.
“The glimmer of hope in that [April] report, as awful as it was, was that 78% of the people who lost their jobs believed that loss would be temporary,” Clemons said. “It turns out that optimism seems to have been warranted. As the economy responded and people went back to work, the jobs were still there.”
Those jobs were full-time, which added 2.2 million, while part-time workers were 1.6 million.
"More resilient"
The rise in employment “suggests that the US economy is more resilient than expected,” said Seema Shah, chief strategist at Principal Global Investors.
“It appears that businesses began rehiring workers earlier and in greater numbers... a trend that is likely to continue as lockdowns ease around the country,” Eric Winograd, senior economist at AllianceBernstein said. “To be clear: things are very far from normal in the labor market. But the pace of improvement, if sustained, suggests more reason for hope in the second half of the year than we have seen from any previous data release.”
The labor force in May rose by 1.75 million, moving the participation rate to 60.8% from 60.2% in April. The total employment level increased by 3.84 million while those who reported losing their jobs fell by 2.1 million.
